The effect of CEO pay on firm valuation in closely held firms

Ronen Barak, Shmuel Cohen, Beni Lauterbach

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

6 Scopus citations

Abstract

We collect data on CEO pay in 122 closely held firms traded on the Tel- Aviv Stock Exchange during 1995-2001. After estimating CEO pay performance sensitivity and CEO "excess pay," we examine how these two pay attributes affect end of period (year 2001) Tobin's Q. Our main findings and conclusions are that (1) when CEO is from the controlling family, the end of period Q is negatively correlated with "excess" pay - "excess" pay to family-CEOs appears like a form of private benefits; (2) when a professional nonowner CEO runs the firm, end of period Q is positively correlated with CEO pay performance sensitivity - incentives to professional CEOs help promote firm value.

Original languageEnglish
Title of host publicationInternational Corporate Governance
Pages19-42
Number of pages24
DOIs
StatePublished - 2011

Publication series

NameAdvances in Financial Economics
Volume14
ISSN (Print)1569-3732

Keywords

  • CEO compensation
  • Excess compensation
  • Family firms
  • Owner CEO
  • Ownership structure

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